How to choose a car loan broker

A car loan broker can find you a lender and help you apply for a car loan, saving you both time and money. They can also lend you some expertise if you’re new to getting an auto loan. But you should still do your research to make sure you find the best car loan broker for your needs.

How does a car loan broker differ from a direct lender?

There are a few key differences between a car loan broker and a car lender. A lender will only offer you its own products, whereas a car loan broker will browse through car loan options from multiple financing companies and suggest the right products to fit your needs.

By sifting through multiple lenders for you, a broker saves you the trouble of having to get multiple quotes yourself. An auto loan broker then also helps you fill out the loan application for whichever option you choose.

What are the benefits of using a car loan broker?

There are a variety of benefits that come with using a car loan broker in Canada.

• Access a range of lenders. If you don’t have a lot of time to look around but still want the best deal available for your car, an auto loan broker is able to engage with a variety of lenders and different institutions in order to get you what you need.
• Convenience. There are many institutions competing for your business at the same time instead of you individually meeting with one lender at a time.
• Save your credit file. Rather than applying with more than one lender, which could damage your credit score, working with a broker essentially lets you apply with multiple lenders through one application.

How do I choose a car loan broker?

Choosing the best car loan broker for your needs can help make the car financing process smooth. Here are some things to keep in mind when deciding which broker to go with.

Find out how many lenders the broker compares

It makes sense to go with an auto loan broker that searches through a large number of lenders to find options for you. Check that any broker you’re interested in is partnered with a large network of auto financing lenders in Canada – from the big financing companies to the smaller ones that you’ve maybe never heard of – so you have a good range of options to choose from.

The car loan broker’s reputation

Before you commit to a broker and its affiliated lenders, you’ll want to know what sort of company you’re working with. A broker’s online reputation and ability to answer your questions will be important when you’re deciding which company to choose.

Pick your auto loan broker based on their specialties

If you have bad credit, find an online auto loan broker that can help you find a loan for your credit range. If you have a specific budget, find a broker that is skilled in negotiating with lenders. Whatever your needs, there is likely a broker out there that can meet your expectations.

Ask questions

Never stay quiet during the loan process. You should ask questions of every broker you find and make sure you keep a list of the broker’s fees. Each service the broker offers may have a different fee, so you should request a full outline of charges to compare brokers. Keep in mind that a car loan broker should be transparent with their fees.

Know if an auto loan broker is legitimate

The most important thing to know is to make sure that your broker is acting within the law by having a provincial licence if it’s required. Check with your province’s department/ministry tasked with regulating vehicle sales. Below is a list of such organizations:

Getting all the right information is vital in making your decision, so it’s okay to ask questions before agreeing to go with a car loan broker. Making a wish list of your loan requirements can also help you show the loan broker exactly what you’re looking for.

Compare car loan broker options

Are there any risks to using a car loan broker in Canada?

There are a few risks to using an auto loan broker. For example, you may not be approved for a loan despite following the broker’s instructions and filling out the form properly. This can be tough as you have done the legwork and received no reward for it.

There is also the potential risk of being approved for a loan that is less than the amount that you need. In that case, discuss what other options you may have with your broker. You may need to consider getting a cosigner or buying a less expensive car.

Another aspect to keep in mind is that the loan the broker is pushing may work out better for the broker than you, whether that is because of a higher commission rate or a higher fee that it charges you. Don’t feel pressured to sign on to any option. Instead, carefully consider which option makes sense for you.

How do I apply for an auto loan broker online?

There are a few easy steps to completing an application with a car loan broker.

1. Get in touch. Most brokers have contact information or a quote form on their website.
2. Apply. Brokers typically ask questions about your financial situation, the car you’d like to buy and the loan terms you’re seeking. This information will be used to do a preliminary assessment of your options.
3. Wait for the broker to cross check your application. Many online brokers can use algorithms to quickly find quotes on car loans that you can qualify for.
4. Review your options. If you have any questions, you can ask your broker for clarification.
5. Agree to the terms. Discuss the broker’s terms and make sure you are aware of your obligations under the agreement. Find out if and how the agreement permits you to switch brokers if you want to as well as how the broker’s fees are paid. Also verify that you have the right to reject any loan offers you receive. You have a right to take time to understand the “fine print”, so don’t let yourself be pressured into making a hasty agreement. The best car loan brokers will make sure you’re comfortable before signing on to anything.
6. Drive away in your new car. Once the broker finds you a lender and you sign the loan documents, the broker then sends funds directly from the lender to the dealership (or whoever is selling you the car). At this point, you can pick up your new vehicle and get driving!

What do I need to apply with a car loan broker?

Here’s what you’ll need to submit as part of your application:

• Driver’s licence
• Insurance information
• Proof of income
• Proof of residence
• Other personal information like your credit score

You’ll also have to provide information about the car you’d like to buy and the person or company selling it (if you’ve chosen your vehicle).

The more complete your application, the better your chances of getting it approved. Online brokers work with a variety of lenders, so they’ll help you cast a wide net by highlighting the strongest aspects of your application.

Pros and cons of applying with an auto loan broker

Is there anything I should keep in mind?

Buying a new car is exciting, but there are a few things to keep in mind before signing any binding contracts.

• Be realistic. Besides a house, a car is one of the bigger investments you’ll make. Go for a purchase that’s good value for money and that you can afford to pay off and maintain.
• Thoroughly check the car. Before signing any legal contracts, make sure that the car corresponds with the seller’s description. Check the car’s kilometres, the features advertised and its general condition.
• Don’t settle. You don’t have to sign or agree to anything if you don’t feel comfortable with the broker’s recommendations. Make sure that the broker has a clear idea of what you want and what you’re willing to pay.

Bottom line

When it comes to financing your next car purchase, a car loan broker can be a great option if you want to avoid filling out multiple applications and waiting to hear back from each individual lender. Make sure to conduct a thorough check on the auto loan broker you choose. Make sure to compare all of your other car loan options in our full guide here.

Frequently asked questions about car loan brokers

• What if I don't earn enough to qualify for a car loan?

  Many car loans are secured with an asset, such as the vehicle you’re purchasing or other valuable property. You can use the collateral to lower the total cost of your loan, but if this still isn’t enough, consider finding a cosigner to help with your purchase. Discuss your situation with your car loan broker to explore all of your options.

• Can I have my loan approved before I start car shopping?

  After an initial assessment, some auto loan brokers offer conditional pre-approval before submitting your application to lenders. This means the broker believes you’ll qualify for a loan, and you can use this pre-approval to guide your car shopping.

• How do I know I can trust the lender?

  Since you’re not dealing with the lender yourself, it’s a good idea to make sure you’re borrowing from a reputable service. Ask your car loan broker about their experience working with that lender. Check to see whether the lender is registered and licensed in your province.

  It also helps to research previous customer’s reviews to see if they match with the lender’s claims. If you have any reason to doubt the legitimacy of a lender, you’re under no obligation to finalize the loan.